Washington state regulators are investigating Ethfinance for potential fraud after a local investor lost $310,000, highlighting risks of crypto scams on social media.
A local investor reported losing an astounding $310,000, prompting Washington state regulators to investigate Ethfinance, a crypto trading platform.
The case raises concerns about the potential for crypto schemes to exploit unsuspecting victims via social media.
Ethfinance was introduced to the unidentified investor through a “random friend request on LinkedIn,” according to the Washington State Department of Financial Institutions (DFI).
This innocuous online interaction evolved into a financial nightmare. The investor transferred a total of $310,000 from their DeFi wallet to Ethfinance, attracted by the prospect of large returns on cryptocurrency trading.
Nevertheless, the investor‘s initial investment and purported proceeds were met with suspicion when they attempted to withdraw a portion of them.
The investor was required to submit additional funds to conclude a “smart contract” before any withdrawals were permitted by Ethfinance’s customer service, which communicated exclusively through Telegram messenger.
This approach, which is frequently employed in advance fee schemes, raises significant concerns regarding the legitimacy of the platform.
The investor, who was legitimately apprehensive, declined to send additional funds and has been unable to access their invested funds since their account was closed.
The DFI issued a public warning classifying the case as a potential “Advance Fee Fraud” scheme, while also emphasizing that they have not verified all the details of the complaint.
According to a spokesperson for the DFI, these schemes frequently entice victims by promising high returns on investments, only to subsequently necessitate the payment of fees or taxes before any purported earnings can be withdrawn.
This approach is similar to the strategies employed by the US Securities and Exchange Commission (SEC) to identify comparable frauds.
The DFI’s alert urges Washington residents to exercise extreme caution before responding to any unsolicited investment offers, particularly those that originate from social media or messaging apps. It functions as a stark reminder.
The department also emphasized that investment professionals who provide services to Washington residents must be licensed with the DFI.
This incident is not an isolated occurrence. The DFI also identified two additional crypto trading platforms, WTOCoin and Foundation-coin, for exhibiting comparable red flags, such as investors’ challenges withdrawing funds.
New opportunities for fraudsters to target potential victims have emerged as a result of the proliferation of social media platforms such as LinkedIn.
The inherent complexities and lack of mainstream regulation of cryptocurrency can further obfuscate fraudulent activity.
Investors, particularly those who are new to the crypto space, are particularly susceptible to these online strategies.
